Fraudsters expose 100,000 across US

A US credit data company has admitted that fraudsters last October accessed records on up to 35,000 people, according to reports from AP and the LA Times.

Georgia-based ChoicePoint Inc. confessed on Tuesday that the scammers "may have stolen credit reports, Social Security numbers and other sensitive information" on thousands of Californians, although it admits that "the number of victims nationwide could total 100,000". The revised figure comes after the company initially insisted that only California was affected - a claim dismissed as "ridiculous" by a computer fraud expert.

Fraudsters apparently gained access to the records by making bogus applications to set up more than 50 ChoicePoint accounts, which they then used to trawl the database as would any legitimate paying customer. ClearPoint sells its stored information to the US government and private business - landlords and credit companies are among those who use the reports to make risk assessments on potential clients.

It is not entirely clear how the scammers were able to set up these accounts, although ChoicePoint spokesman James Lee told the LA Times that the company "no longer accepted faxed copies of business licenses". He refused to explain how the scammers "circumvented rules that require permission from the subject of a credit report to release the data to a third party", but admitted: "The bad guys are very bright, very smart and very committed."

The scam was detected when a ChoicePoint employee noticed a suspicious application to open a customer account. The company contacted the Los Angeles County sheriff's fraud investigators, who discovered 50 active bogus accounts belonging to non-existent debt collection and insurance agencies, as well as other fronts. The fraudsters reportedly used previously stolen identities to set up the fake firms, lending them an air of credibility and a certain resistance to scrutiny.

Further investigation revelealed that during the one-year duration of the fraud, personal details on at least 10,000 people had been accessed, and some 750 individuals' identities used to buy goods.

Things began to unravel for the alleged perpetrators when another suspicious application for a ChoicePoint account "came in by fax from a Southern California Kinko's". Police replied by fax asking for a new signature and when 41-year-old Olatunji Oluwatosin arrived to pick it up, the net closed. Oluwatosin claimed that he was picking the fax up for someone else, but was charged with six felony identity-theft counts and is currently in jail awaiting trial.

ChoicePoint "closed the suspect accounts, restricted access, strengthened site verification, informed law enforcement agencies and cooperated in their investigation" immediately following the fraud. It did not, however, email those in California whose data may have been compromised until last week - in accordance with a 2003 California law which obliges companies "which do business with residents" to inform them when their "unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person".

Specifically, the law demands that if a hacker gains access to data for 500,000 or more customers, the company must alert them via email, a "conspicuous" website posting and disclosure to a "major media outlet".

Since California is the only state which obliges firms to issue such warnings - and despite ChoicePoint spokesman James Lee's LA Times description of the fraud as "extraordinarily serious" - the company has not contacted potential victims elsewhere. However, the man in charge of Southern California's High Tech Task Force Identity Theft Detail, Robert Costa, told AP that he believes several other people were involved and that the attack "definitely could not have been limited to Southern California".

Nick Akerman, partner and co-chair of the computer fraud division of law firm Dorsey & Whitney, agreed, telling AP: "I've never heard of a hacker doing something just to make a company comply with a state statute - that's ridiculous." ®